4 Strategies for Buying Short Sales in Florida

There is no doubt that the Florida real estate market is filled with short sales. Buying short sales in Florida can be very tempting to would be real estate buyers as they are listed much lower than other homes, but the process of buying one can be very confusing. A short sale occurs when the owner of the house is trying to sell it for less than he owes on his mortgage. The owner hopes that the bank is going to be okay with this and either wave the remaining amount of the loan or work out some kind of deal to help the owner repay the remaining loan. Either way the ultimate decision does rest with the bank, not the owner. The owner is really the intermediary between the buyer and the owner's bank.

However, because of the massive backlog that the banks are currently confronted with, it can take many months before the bank replies to an offer. And, what's critical to understand, is the fact that during this time the buyer and seller are in fact under contract...even though the bank has not yet approved the offer. The primary reason why it takes such a long time to hear back from the bank is due to second mortgages. These second mortgages usually are home equity loans. When the market was flourishing and people's homes were increasing in worth they were building equity in their home and owners could easily secure second mortgages based on this equity. Well, even though the bank that has the 1st mortgage is willing to accept the short sale offer and a loss does not mean that the bank that has the 2nd mortgage is willing to do so. It is these second mortgage loans that are the primary obstacle in most short sales.

So what's a buyer to do?

Well, if you are serious about buying short sales in Florida, there are a handful of steps you can take as the buyer to make your life a whole lot better.

1. One thing you must do is find out just how many mortgages the owner has on the house. This isn't a secret. Simply ask the listing agent for the information. Bottom line: the more mortgages the owner has on the house the more complicated it will be to purchase that home.

2. Find out who is negotiating with the seller's bank. Once again, ask the listing agent for this information. Working with the bank can be a long and aggravating process. It takes a considerable amount of time getting in touch with the bank, being put on hold, being transferred from one person to the next, every single day. Negotiating with the bank is a time-consuming process to say the least. So ideally, the sellers have hired an attorney who is experienced in short sales to do the negotiating. On the other hand, if it is listing agent that is in charge of the negotiating then make sure to inquire about their success rate.

3. Because it is often the second mortgage that holds up the majority of short sales in Florida, it is wise for the buyer to have some extra funds to help pay this off. For example, if the second mortgage is $15,000 and the bank is not willing to let the owner out of their requirement to pay on that mortgage then the buyer does not have many options. The seller is already broke so he is not going to be coming up with the cash, so if the buyer really wants the house then it is the buyer who must pay off that second mortgage. Therefore, it's a good idea to have some cash put aside should this scenario arise.

4. Sometimes whether a short sale is approved or not may come down to just a few thousand dollars. Once again the owner is already broke so if the buyer is not willing to make up the difference the only other option is to look to the Realtors. If you have a real estate agent who is able to lower their commission it may make up the difference. For example, in a conventional real estate deal the seller typically will pay their Realtor 6% of the final selling price with 3% of that going to buyer's Realtor. In a short sale situation, it's the bank that typically pays the commission. Therefore, if the Realtors will take a cut in their commission, the bank can save several thousand dollars.

Obviously buying short sales in Florida is not for everyone. However, if you are successful you may be able to find a great deal on a Florida home. By following the tips mentioned above you'll improve your odds of a successful short sale purchase while at the same time cut down the amount of frustration that comes along with buying one.